Colton v Hunter - [2009] SASC 299

SUPREME COURT OF SOUTH AUSTRALIA
(Appeal from a Master: Civil)
COLTON & ANOR v HUNTER & ANOR
[2009] SASC 299
Judgment of The Honourable Justice Layton
14 September 2009
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA
PROCEDURE - JUDGMENTS AND ORDERS - AMENDING, VARYING AND SETTING ASIDE - SETTING ASIDE BY CONSENT
Appeal against decision of a Master - Master made order on application of respondent appointing an inspector to investigate a trust pursuant to s 84C of Trustees Act 1936 (SA) - circumstances of parties changed subsequent to order being made - appeal instituted - parties sought to set aside order of Master by consent - discussion of principles where an appeal can be allowed by consent - whether proceedings to appoint an inspector were inter partes in nature - whether order could be set aside pursuant to Rule 242 of the Supreme Court Rules (2006) - whether evidence of changed circumstances required.
Held: Order set aside pursuant to Rule 242 - parties provided evidence to show that order appointing inspector to trust no longer required.
Trustee Act 1936 (SA) s 84C, 84D, 84E; Supreme Court Civil Rules 2006 (SA) R 242, referred to.
Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64; Citigroup Pty Ltd v Mason (2008) 171 FCR 96, discussed.
Hunter v Colton [2009] SASC 129, considered.

COLTON & ANOR v HUNTER & ANOR
[2009] SASC 299

LAYTON J: This matter has a confusing procedural history. It began before me as an appeal against an order of Judge Lunn who appointed an inspector to investigate a trust pursuant to s 84C of the Trustee Act 1936 (SA) (“the Act”). The matter was dealt with by Judge Lunn as an interlocutory application by the plaintiffs, who are the beneficiaries of a trust called the JB Colton Family Trust (“the Trust”), against the defendants, who are the trustees of that trust. The plaintiff beneficiaries of the Trust were two children of the late Rosemary Hunter, who died in 1994. The trustees of that trust comprise Alan Colton, who was the brother of the late Rosemary Hunter, and John Powell.
Judge Lunn gave detailed reasons for appointment of an inspector.[1] The reasons for which Judge Lunn determined that the appointment of an inspector was appropriate are set out mainly at [19]-[25]. In particular Judge Lunn said (at [19]):
The defendants’ counsel contended that mere bookkeeping irregularities, without any more serious allegations against the trustees, was not sufficient justification for the appointment of an inspector. He pointed to the substantial inquisitorial powers of an inspector under s 84D of the Act and said it showed s 84 was confined to cases of wilful misconduct or fraud. While I accept on what is before me at present that there are no such allegations against the defendants, I do not accept that s 84 is necessarily confined to such cases. Here there have been significant irregularities in compliance with Regulation 6 over a substantial period of time in a Trust having assets worth many millions of dollars. Some income due to the Trust has ended up in unclaimed moneys accounts of some companies in which the Trust held shares. There is a reasonable possibility that an inspector may exercise his powers under s 84D to obtain relevant information and documents from Mr Broadbent. An inspector will be better able than Mr Handley to produce an impartial and objective report on the administration of the Trust.
[1] Hunter v Colton [2009] SASC 129.
In the course of his reasons Judge Lunn set out the factual basis of the application. His Honour explained that Mr Broadbent, to whom he refers above, was an accountant who had conducted the business of the Trust for many years. In about 2005 questions began being asked about the Trust by the beneficiaries. Mr Broadbent was apparently quite difficult to contact at this stage and there was some question as to whether he was being entirely forthcoming with trust documents and accounts. Action was brought in the Supreme Court to require delivery of documents. John Powell, the present defendant, was appointed as a trustee in 2006 and in 2007 a new accountant, Mr Hadley, was appointed.
The reasons given by Judge Lunn seem to suggest that in order to overcome any inadequacy in the past of being able to obtain information, it would be preferable for an inspector to be appointed to provide an impartial and objective report on the administration of the Trust. The appointment of such a trustee, which is required under the Act to report to the Supreme Court, is obviously quite a costly procedure.
Subsequent to that appointment the defendants sought to appeal against the decision. The matter was listed before me to determine the appeal.
Prior to the hearing of the appeal, on 7 July 2009, the parties filed consent orders sought on the appeal in the following form:
1. The Appeal be allowed.
2. The order of his Honour Judge Lunn dated the 15^th day of May 2009 be set aside and in lieu thereof order that:
a. The Respondents’ Application under s 84C of the Trustee Act 1936 for the appointment of an inspector be dismissed.
b. The Respondents do pay the Applicant’s costs of, and incidental to, that application on the solicitor/client scale as agreed or adjudicated.
3.The Respondents do pay the Appellant’s costs of the Appeal on the solicitor/client scale as agreed or adjudicated.
In response to these consent orders, I brought the matter on for directions. At that hearing I raised with the parties issues as to whether, in the absence of any supporting information being provided to me, it was appropriate to set aside the order made by Judge Lunn simply because the parties consented.
I noted that, in the case of Telstra v Minister for Broadband (“Telstra”),[2] the Federal Court held that before a court can grant an appeal, a court must be satisfied that there is an error in the decision under appeal before consent orders can be made. The decision in Telstra was subsequently commented upon and somewhat modified by the Full Court of the Federal Court (Moore, Finn and Dowsett JJ) in Citigroup Pty Ltd v Mason.[3] Their Honours discussed Telstra and concluded (at 101[15]):
Some of these problems are particularly acute in litigation that can truly be characterised as inter partes litigation, that is, where one party is asserting a legal right and seeking a remedy against another party and nothing more. The approach in Telstra 166 FCR 64 may substantially inhibit parties reaching agreement and requesting a Full Court to give effect to their agreement in an appeal by making consent orders. Even if it does not inhibit parties in reaching settlement, it requires them to undertake, in some cases probably, at additional expense, the burden of establishing appellable error. We accept there may be classes of cases heard in the appellate jurisdiction where it is appropriate for the parties to explain or justify the outcome to which they have agreed, as there are in relation to some classes of cases in the Court’s original jurisdiction. However, we find it difficult to accept that, as a matter of principle of general application, parties to an appeal must be required to justify their settlement (by demonstrating error) as a condition precedent to the exercise of a power in the appellate jurisdiction to make consent orders.
[2] Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64 (French, Weinberg and Greenwood JJ).
[3] (2008) 171 FCR 96.
Therefore, to the extent that these Federal Court authorities are persuasive authority in this Court, there is support for the principle that in litigation in which one party is asserting a legal right and seeking a remedy against another party and nothing more (truly inter partes litigation), as a general rule the parties are not required to demonstrate error as a condition precedent to the exercise of a power in the appellate jurisdiction to make consent orders.
I also noted the nature of the jurisdiction which had been exercised by Judge Lunn and pursuant to which his order had been made, namely, s 84C of the Act. Section 84C(1) provides:
The Supreme Court may, on its own initiative, or on the application of any person who has, in the opinion of the Court, a proper interest in the matter, appoint an inspector to investigate the administration of any trust.
This section forms part of Part 5A of the Act which provides for the keeping of records by trustees and also invests the Supreme Court with a supervisory role to ensure that trusts are properly administered in this respect. The power of the Court can be exercised on the Court’s own motion. These facts strongly suggest that litigation regarding the appointment of an inspector is not simply within the ordinary parameters of adversarial inter partes actions. This is further emphasised by the provisions of s 84E which provides:
84E—Reports to be made to Attorney-General
(1)Upon completing an investigation under this Part, an inspector shall make a report in writing to the Supreme Court and to the Attorney-General upon the results of the investigation.
(2)An inspector shall make such interim reports to the Supreme Court and to the Attorney-General in relation to an investigation under this Part as the Court may direct.
Further, the conduct of a trust may be seen as a matter of public policy as the Court has inherent jurisdiction to supervise a trust and its trustee.
I raised these matters with the parties and at the same time pointed out another possible approach was to take an application pursuant to Rule 242 of the Supreme Court Civil Rules 2006 (SA). I then adjourned the matter to allow the parties to consider their positions.
On the resumed date, 20 August 2009, an oral application was made to have the matter dealt with pursuant to Rule 242, but still no evidence was placed before me. The orders sought at this stage were:
1. The Appeal be dismissed.
2. The Plaintiffs pay the Defendants’ costs of the appeal on a solicitor/client basis.
3.Pursuant to r 242 of the Supreme Court Civil Rules, the orders Judge Lunn made on 15 May 2009 be set aside.
4.The Plaintiffs pay the Defendants’ costs of, and incidental to, the application for the appointment of an inspector under s 84C of the Trustee Act on a solicitor/client basis.
5. The counterclaim be listed for a directions hearing before a Master of the Court at a date and time to be advised.
My next concern was whether or not Rule 242 of the Supreme Court Civil Rules required something more than simply consent by the parties to vary the order.
Rule 242 provides:
242—Power to correct, vary or set aside judgment
(1)     The Court may correct an error in a judgment at any time.
(2)     If satisfied that the justice of a case so requires, the Court may—
(a)vary a judgment; or
(b)set aside a judgment and reopen an action.
Example—
The Court might set aside a judgment and reopen an action if satisfied that the judgment is vitiated by a mistake.
(3)     The Court may act under this rule on its own initiative or on application by a party.
(4)     If the Court proposes to act under this rule on its own initiative, it must notify the parties and allow them an opportunity to make representations on the proposed course of action.
[Emphasis added.]
I again raised the absence of any evidence being placed before me.
Submissions were made by Dr Bleby, counsel for the defendant trustees, that:
following the decision of Judge Lunn, a whole lot of further documents were located which, in essence, demonstrate the correctness of the financials and my client is satisfied with the position about which it was not satisfied at the time. Those documents were in the possession of my client and it was an oversight that they had not been identified as what they were at the time of the hearing. That’s it in an absolute nutshell.
Counsel for the plaintiff beneficiaries strongly urged that as the action was truly an inter partes action, I should make the orders sought by consent. I still expressed my concern about the reasons for the order made by Judge Lunn, coupled with the absence of evidence alleviating the issues raised by his Honour. I emphasised that my concern could be satisfied by an affidavit setting out the basis upon which the parties had changed the approach previously taken to the appointment of an inspector. Without determining the matter, I adjourned the matter to allow an affidavit to be filed.
Subsequently, three affidavits were filed. The first two affidavits, both filed on 2 September 2009, were on behalf of one of the plaintiffs, Andrew Stirling Hunter; the first affidavit being of Andrew Stirling Hunter himself and the second of his father, Allan Roy Hunter.
The affidavit of Allan Roy Hunter deposed that he agreed to store boxes and other equipment for his son, Andrew, in a storage facility at Norwood. He stated that this material included three boxes of papers which had been removed from the property of the deceased, Rosemary Colton, during a cleaning up process after her death. He deposed that he had inspected one of the boxes in June 2008 but he did not think about inspecting the other documents until on or about 7 June 2009. He stated he was not aware of the nature and extent of the documentation prior to that time and, in particular, that the documents included financial account documents up until the end of the financial year ending 30 June 2004, being a controversial point of time when there had been an absence of documentation. He finally deposed that subsequent to his inspection he was satisfied that the capital of the Trust was intact and that the portfolio of trust shares was accurately recorded. He then communicated that to his son and his daughter (the plaintiffs) who indicated to him that they were satisfied that the proceedings should be brought to an end.
The affidavit of Andrew Stirling Hunter merely supported some of the matters set out in his father’s affidavit.
This information would have been sufficient to satisfy me that it was appropriate to set aside the order made by Judge Lunn on 15 May 2009. However, the matter became more complicated.
On 10 September 2009 the defendant, Alan Stirling Colton, filed an answering affidavit to the two affidavits referred to above. His affidavit sought to refute assertions contained in the previous affidavits filed by the plaintiffs by deposing that the plaintiffs had not simply accidentally found out about material in the boxes, but had consciously and knowingly removed the boxes from the shed. He therefore refutes the background to how the information had most recently been disclosed by the plaintiffs. He also deposes that the records have now been returned to the trustees, which includes himself, by a solicitor’s letter dated 23 June 2009. He therefore asks that the Court “reject the explanation given so far” and instead requests the Court set aside the order of Judge Lunn on a different ground sought by the plaintiffs, namely that it is “unsafe to allow the order to stand given that he [Judge Lunn] was unaware of the fact that the trustees had been wrongly deprived of the said records, and that all primary sources would have been available to Mr Handley.” He contended that, “[i]n that event the Judge would have been unlikely to have concluded that records available to Mr Handley were deficient and that there was no reasonable basis to require the statements and returns produced by him to be independently verified, and that the reasonable exercise of his discretion by the Judge or by this Court would be in favour of the Trustees and non‑appointment [sic] an inspector”.
I have therefore been presented with two sets of different facts to set aside, by consent, the order made by Judge Lunn. This is less than satisfactory and has, in my view, highlighted the concern that I had over lack of evidence. However, notwithstanding these differences, there is a common factor, to both versions, namely that information has now been made available to Mr Handley, which had previously not been given to him. A primary fact upon which Judge Lunn relied when making the order, namely the deficiency in financial information, has now been rectified.
It is not necessary for me to resolve the factual circumstances by which the information has now been made available to Mr Handley. In my view, therefore, it is no longer necessary to continue the appointment of an inspector pursuant to s 84C.
I am satisfied that it is appropriate to vary the order.
Unfortunately, the matter does not just rest there. The minutes of order which were to be the subject of a consent order before me contained an order that the plaintiffs pay the defendants’ costs of and incidental to, the application for the appointment of an inspector under s 84C of the Act and of the appeal “on a solicitor‑client basis”.
However, the affidavit of Allan Stirling Colton requests that the costs be paid on “a solicitor‑client full indemnity basis”. This order is in different terms and may result in different outcomes.
In these circumstances I consider it appropriate to make the following orders, which are by consent, namely:
1The appeal be dismissed.
2Pursuant to Rule 242 of the Supreme Court Civil Rules 2006 (SA) the orders of Judge Lunn made on 15 May 2009 be set aside.
3That the plaintiffs pay the defendants’ costs of and incidental to the application for the appointment of an inspector under s 84C of the Trustee Act and further, the costs of and incidental to the appeal.
4I reserve for further argument as to whether the costs in para 3 should be ordered on a solicitor‑client basis or a “full indemnity” basis.